Loblaw Cos. Ltd.

Overall, we believe that growth will be in the low single digits for fiscal 2021, as the company laps a very strong 2020. We expect margins to expand in the second half of 2021, as customer mobility expands and sales normalize. Even though pandemic-related costs will decline, we don't expect margins to increase beyond 2019 levels in the next 12 months. The stable outlook on Loblaw reflects S&P Global Ratings' expectation that consolidated the adjusted debt-to-EBITDA ratio will be in the low-to-mid 3x area for parent George Weston Ltd. (GWL) over the next two years, supported by Loblaw's steady profitability. Our rating on Loblaw, which is considered a core member of the GWL group, is limited by our assessment of

...We expect Loblaw to maintain strong competitive positon as shift to food at home persists amid increasing competition. With social distancing and countrywide stay-at-home mandates, consumers initially focused on pantry loading, which elevated Loblaw Cos. Ltd.'s same store sales (SSS) close to 10% in first-half 2020. With reduced restrictions, SSS growth has tapered to 6.9% in third quarter but remains above historical levels. High demand for groceries is primarily led by a shift toward consumers eating meals at home. We continue to expect shoppers to consolidate trips, which is reflected in higher SSS in conventional (9.7%) versus discount stores (4.7%). Revenue growth will be supported by increased basket sizes and growing average article price (increasing bulk item sales), rather than increased traffic. Reflecting the recently increased competitive landscape, Loblaw plans to maintain its promotional intensity thus defending share in the conventional banners and improving its positioning...

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